Israel in 1998

Area: 20,320 sq km (7,846 sq mi), not including territory occupied in the June 1967 war (Emerging Palestinian Autonomous Areas)

Population (1998 est.): 5,740,000

Capital: Jerusalem is the proclaimed capital of Israel (since Jan. 23, 1950) and the actual seat of government, but recognition has generally been withheld by the international community.

Chief of state: President Ezer Weizman

Head of government: Prime Minister Benjamin Netanyahu

Israeli-Palestinian relations again dominated the political agenda in 1998 as growing mistrust between the parties threatened the Oslo peace process launched in 1993. Only determined U.S. mediation kept the ailing process alive, culminating toward the end of the year in a major diplomatic coup; on October 23, after an acrimonious 19-month-long deadlock, Israel and the Palestinians signed an agreement in the U.S. that stipulated further Israeli withdrawal from the West Bank and Palestinian efforts to clamp down on terrorist acts against Israel. The groundbreaking deal was hammered out during an intensive nine-day summit at the Wye Plantation in Maryland. U.S. Pres. Bill Clinton took the initiative to save the process after a breakdown of trust between Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority (PA) Chairman Yasir Arafat had rendered further unmediated contacts between the parties futile.

Part of the problem was Arafat’s insistence that he would unilaterally declare a Palestinian state on May 4, 1999, the date the Oslo peace process was to have been completed, and Netanyahu’s threat to take strong retaliatory measures against such a move. To preempt a potentially dangerous escalation, Clinton summoned Arafat and Netanyahu to the Wye Plantation and exerted heavy pressure on both.

The result was the Wye Memorandum, which spelled out in precise detail steps to be taken by Israel and the Palestinians to complete the interim peace deal they had been negotiating for five years and also laid the foundation for negotiations on a permanent settlement of the Israeli-Palestinian conflict. Israel would carry out two long-overdue redeployments of its troops in the West Bank in three phases over a 12-week period, and the scope of a third and final interim redeployment would be decided by a joint committee. The Palestinians promised to crack down on the Hamas and Islamic Jihad military infrastructure, arrest 30 wanted terrorists, reduce their police force, collect illegal weapons, prohibit incitement against Israel, and complete the formal annulment of clauses in the Palestinian Covenant calling for Israel’s destruction.

Netanyahu had insisted on strict reciprocity, with Israeli commitments contingent on the Palestinians’ carrying out their undertakings. The Wye Memorandum also provided for a beefed-up CIA presence to monitor implementation by both sides.

No sooner had the memorandum been signed than the familiar pattern of mutual recrimination resurfaced, calling the new agreement into question. On October 29 a Hamas suicide bomber failed in a bid to ram a bus full of schoolchildren in the Gaza area, and on November 6 two Islamic Jihad bombers were killed in an abortive car bombing outside Jerusalem’s Mahane Yehuda market. Netanyahu took both incidents as evidence of Arafat’s unwillingness to crack down on terrorism. The atmosphere was further soured by angry exchanges as to how the Palestinian Covenant was to be annulled.

After a reaffirmation by the Palestinian leader of his strategic commitment to peace, Israel released 250 Palestinian prisoners and went ahead with the first stage of the agreed withdrawal on November 20. In an operation code-named "calling card," 10 small towns and 18 villages between Nablus and Jenin were handed over to the Palestinians. The International Airport in Gaza was inaugurated four days later with the arrival of a flight from Egypt.

Because it entailed putting the Palestinians in control of as much as 40% of the West Bank, the Wye Memorandum brought Netanyahu into conflict with right-wing groups in Israel. Ironically, approval of the memorandum in the Knesset (parliament) on November 17 by an overwhelming 75 votes to 19 with 9 abstentions was due to blanket support by the opposition parties. As for the governing coalition, two National Religious Party Cabinet ministers voted against the memorandum, and seven other ministers abstained. In January David Levy had resigned as foreign minister, pulling his five-person Gesher faction out of the coalition and reducing Netanyahu’s majority to two. Consequently, the government’s chances of survival in the aftermath of the Wye agreement seemed slim. Leading figures in Netanyahu’s Likud Party advised him to form a national unity government with the main opposition Labor Party or to call early elections. When Netanyahu’s efforts to achieve a unity government failed, he joined with a majority of the legislators and voted to dissolve his government. Elections were scheduled for May 17, 1999. In the meantime further enactment of the provisions of the Wye accord seemed uncertain at best.

The deadlock in the peace process until the Wye breakthrough affected Israel’s relations with the United States, Europe, and the Arab world. In a January visit to the U.S., Netanyahu further strained his uneasy personal ties with Clinton by meeting with two of the president’s most vehement critics, "moral majority" leaders Jerry Falwell and Pat Robertson. The extent to which the U.S. administration had become more receptive to Palestinian concerns during the long deadlock was underscored by President Clinton’s unprecedented visit to Gaza in December.

Strains in Israel’s relations with Europe came to the fore when British Foreign Secretary Robin Cook, representing the U.K. presidency of the European Union, visited the controversial Har Homa construction site in Jerusalem on March 17, and, contrary to a previous agreement with the Israelis, shook hands with a Palestinian leader there. It was the start of construction work on the site by the Israelis a year earlier that had led to the collapse of the Palestinian-Israeli peace talks and the ensuing stalemate.

To improve ties with the Arab world and counter domestic criticism of rising casualties in Israel’s self-declared security zone in southern Lebanon, Defense Minister Yitzhak Mordechai launched an initiative in January for an Israeli pullback. It was based on UN Resolution 425, which called for Israeli withdrawal and Lebanese military control of the evacuated areas. Mordechai declared that Israel would withdraw if the Lebanese army guaranteed security in the south. His offer was rejected by the Lebanese, who insisted that the resolution called for Israeli withdrawal with no strings attached. Mediation efforts by France and UN Secretary-General Kofi Annan failed.

Despite the strains on ties with other nations in the region, Israel’s strategic relationship with Turkey strengthened. In early January U.S., Turkish, and Israeli naval forces took part in "Operation Reliant Mermaid," a joint search-and-rescue operation off the Mediterranean coast. Israeli and Turkish military industries tightened cooperation on a wide range of issues, and Israel won a contract to upgrade 48 Turkish F-5 fighter planes at a cost of $75 million.

Israel won another foreign-policy success in August with its rescue mission to Nairobi after a terrorist bombing of the American embassy there. In a highly publicized five-day operation, the Israeli team rescued three people from under the rubble and located almost 100 bodies.

On the domestic front the government and the defense establishment suffered a number of setbacks. On February 24 Danny Yatom, the head of Israel’s intelligence service, the Mossad, resigned after a series of organizational blunders. Although a "clarification committee" on the abortive assassination attempt five months earlier by Mossad agents on Hamas official Khaled Mish’al in Amman, Jordan, cleared the prime minister, it was sharply critical of Yatom. Revelation of another bungled operation in Switzerland only days after the committee’s report was published forced Yatom’s hand. He was replaced by Ephraim Halevy, who had played a leading role in peacemaking with Jordan, and his appointment gave a much-needed boost to Israel-Jordan ties, badly hurt by the Mish’al affair.

On March 4 Pres. Ezer Weizman, supported by the opposition Labor Party, was reelected, defeating the prime minister’s candidate, Shaul Amor in the Knesset 63-49. Tensions between Weizman and Netanyahu were exacerbated as the outspoken president criticized the prime minister’s failure to take the peace process forward.

In May Israel marked the 50th anniversary of its founding, but the jubilee celebrations failed to rouse public enthusiasm. Organizers were criticized for not giving adequate weight to the labour movement’s contribution. There was further controversy when a modern dance sequence was dropped from the main gala event because of opposition from orthodox Jews. The incident triggered bitter recrimination between secular and orthodox Israelis.

Late in the year the Israeli economy showed signs of stress. A sharp devaluation of the shekel against the dollar in October forced inflation up from an annual rate of about 4% to an estimated 9%. Other economic indicators pointed to a deepening slowdown--growth in the third quarter was 1.4%, the lowest in a decade; investments were down by 21.7%; and exports were down by 18.8%. The most worrying statistic for the government was an unemployment figure of more than 9%.

The Emerging Palestinian Autonomous Areas (the West Bank and the Gaza Strip)

Total area: West Bank 5,900 sq km (2,270 sq mi), of which about 180 sq km is under Palestinian administration, about 4,130 sq km under Israeli administration, and about 1,590 sq km under joint administration; Gaza Strip 363 sq km (140 sq mi), of which about 236 sq km is under Palestinian administration and about 127 sq km under Israeli administration

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